An economy produces only two goods: bananas and coconuts. Production units and prices per unit for years 2008 and 2009 are as follows:

2008 quantity( Bunches) 2008 price( $ per bunch) 2009 quantity( Bunches) 2009 price( $ per bunch)

Bananas 800 2 900 4

Coconuts 400 10 500 5

(a)Calculate the nominal GDP for 2008 and 2009

(b)Using 2008 as the base year (i.e., using 2008 prices), what is real GDP in 2008 and 2009? By what percentage does real GDP increase from 2008 to 2009?

(c)Using 20099 as the base year (i.e., using 2009 prices), what is real GDP in 2008 and 2009? By what percentage does real GDP increase from 2008 to 2009?

(d)True or false: "The growth rate of real GDP depends on which year is used as the base year."

(e)Why is real GDP a better measure than nominal GDP?